RITHWIK PROJECTS PRIVATE LIMITED,HYDERABAD vs. ACIT, CENTRAL CIRCLE- 2(2), HYDERABAD

आदेश / O R D E R PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-12, Hyderabad, dated

12.09.2025, and pertains to assessment year 2021-22.

1.The order passed by the Ld. CIT(A) u/s 250 of the Act dt. 12-09-2025 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant.

3.The Ld. CIT(A) ought to have appreciated that the amount of Rs. 59,53,102/- is allowable u/s 36(1)(va) of the Act.

4.The Ld. CIT(A) ought to have considered that all payments I relation to PF/ESI payment were made within the time limits prescribed in the Act.

6.The Ld. CIT(A) erred in upholding the addition of Rs. 31,21,770/- on interest on TDS without considering the facts of the case.

7.The Ld. CIT(A) ought to have appreciated the fact that the expenditure incurred on interest on TDS are of compensatory in nature and not in penal nature and is allowable expenditure u/s 37 of the IT Act 1961.

10.The Ld. CIT(A) erred in upholding the disallowance of Rs. 1,14,15,885/- on assets due to floods in Uttarakhand without considering the submissions made by the assessee which is bad in law.

11.The Ld. CIT(A) ought to have appreciated that as per accounting treatment, the assessee had written off the assets as they were potentially damaged and destroyed as a result of natural disaster in Uttarakhand.

12.The Ld. CIT(A) erred in upholding the withdrawal of the credit of Rs. 24,20,916/- towards on mobilization advances without considering the facts and circumstances of the case.

13.The Ld. CIT(A) ought to have appreciated that the appellant has received an amount of Rs. 8,43,63,262/- as material advance against which the assessee has offered an amount of Rs. 8,41,21,928/- during the year, which thus the withdrawal of the credit of TDS of Rs. 24,20,916/- is not correct.

Rithwik Projects Pvt. Ltd., is engaged in Irrigation, construction of dams,

barrages, spill-ways, canals, construction of hydro-power projects,

Townships, Railway Tunnels & road works, filed its return of income (RoI)

for AY 2021-22 on 12.03.2022 admitting total income of

Rs.54,88,89,020/- under normal provisions of the Income Tax Act, 1961

and Rs.59,07,12,982/- under MAT provisions. The case was selected for

scrutiny and the assessement has been completed u/s.143(3) of the Act

on 29.12.2022 and determined total income of Rs.57,01,14,017/-, by

making addition towards disallowance of belated payment of ‘employees’

contribution towards PF & ESI’ for Rs.59,53,102/-, disallowance of

interest paid on late payment of TDS liability for Rs.31,21,270/-,

additions towards unproved bogus purchase of Rs.2,64,040/- and

disallowance of loss on fixed assets due to flood in Uttarakhand for

Rs.1,14,15,885/-. The AO had also denied credit for TDS of

Rs.24,20,916/- towards TDS deducted on mobilization advance and :: 4 :: claimed by the assessee on the ground that the mobilization advance has

been adjusted for future years and consequently TDS deducted on said

mobilization advance can’t be allowed because income relatable to said

advance has not been offered to tax for the year under consideration.

appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee

challenged the additions made by the AO towards disallowance of belated

payment of ‘employees’ contribution towards PF & ESI’ for Rs.59,53,102/-

, disallowance of interest paid and late payment of TDS liability for

Rs.31,21,270/-, additions towards unproved bogus purchase of

Rs.2,64,040/- and disallowance of loss on fixed assets due to flood in

Uttarakhand for Rs.1,14,15,885/-. The assessee had challenged denial of

credit for TDS of Rs.24,20,916/- and filed various evidences and claimed

that the AO is erred in making disallowance of ‘employees’ contribution

towards PF & ESI’, even though, the assessee has explained the reasons

for delay in payment of PF & ESI on account of Covid lockdown and

consequent disruptions of business activity. The assessee had also

challenged additions made by the AO towards interest payment on late

payment of TDS and claimed that it is compensatory in nature and

allowable as deduction. In so far as disallowance of purchases, the

assessee has furnished supporting bills & invoices and claimed that

purchases are genuine and backed by evidences. As regards disallowance

of loss on fixed assets, the assessee claimed that said loss is not on :: 5 :: account of sale of any fixed assets but due to flash flood in Uttarakhand

and consequent damage of plant & machinery, stores & spares and raw-

materials.

assessee and also taken note of reasons given by the AO for making

disallowance towards PF & ESI rejected the explanation of the assessee

and sustained the additions made by the AO by holding that the issue is

covered by the decision of the Hon’ble Supreme Court in the case of

Checkmate Services P. Ltd. v. CIT (Civil Appeal No.2833 of 2016 dated

12.10.2022) where it has been clearly held that belated payment of

‘employees’ contribution towards PF & ESI’ is not allowable as deduction

u/s.36(1)(va) of the Act. The Ld.CIT(A) further observed that in so far as

disallowance of interest paid on TDS and late payment of GST, the

interest payment on GST is compensatory in nature but not penal in

nature and therefore, the AO ought not to have disallowed interest on late

payment of GST of Rs.4,70,130/-. Therefore, directed the AO to delete

addition of Rs.4,70,130/- towards interest on late payment of GST.

However, interest on belated payment of TDS, the above interest is not

compensatory in nature but penal in nature, because assessee becomes

liable to pay TDS to the government and in default, any payment of

government dues and consequent interest payment on said dues partakes

in the nature of penalties and same can’t be allowed as deduction

u/s.37(1) of the Act. Therefore, by taking into account, the decision of :: 6 :: the Hon’ble Madras High Court in the case of CIT v. Chennai Properties &

Investment Ltd., reported in [1999] 239 ITR 435 (Mad.) observed that

interest paid u/s.201(1A) of the Act partakes the colour of tax and bring

in nature of Income Tax, it can’t be allowed as deduction. Similarly, the

Ld.CIT(A) uphold the additions made by the AO towards disallowance of

unproved purchases and also loss on fixed assets. Likewise, the

Ld.CIT(A) uphold the reasons given by the AO for withdrawing the TDS

credit on mobilization advance of Rs.24,20,916/-.

appeal before this Tribunal.

Nos.2 to 5 of the assessee’s appeal is disallowance of belated payment of

employees’ contribution to PF & ESI of Rs.59,53,102/- u/s.36(1)(va) of

the Act.

7.1 The Ld. Counsel for the assessee referring to month-wise details of

payment to PF & ESI submitted that the delay in remittances of

employees’ contribution towards PF & ESI is mainly on account of

lockdown imposed by the Government throughout the nation to curb the

spread of Covid-19 outbreak and during the relevant point of time, offices

and commercial establishments were closed and likewise, the assessee

was also not able to access any facility including computer for online

payment of dues and due to this reason, there is a delay in remittances.

:: 7 :: Further, various courts including the Tribunal have granted extension for

due date for compliance of various statutory payments and accordingly, if

the delay is on account of Covid lockdown, the same can’t be considered

for the purpose of disallowance u/s.36(1)(va) of the Act. Therefore, he

submitted that the matter may be remitted back to the file of the AO to

verify the facts and decide the issue as per law. In this regard, he relied

upon the decision of the ITAT Mumbai Bench in the case of Diamour

Jewels (P) Ltd. v. CPC reported in [2024] 208 ITD 189 (Mumbai-Trib.).

7.2 The Ld.Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that the issue is covered in favour of the

Revenue by the decision of the Hon’ble Supreme Court in the case of

Checkmate Services Pvt. Ltd., (supra) where the Hon’ble Supreme Court

clearly held that belated payment of employees’ contribution towards PF &

ESI can’t be allowed u/s.36(1)(va) of the Act. Further, the claim of the

assessee that delay is due to Covid lockdown is also not substantiated by

filing relevant details, challans for payment of dues with corresponding

dates and therefore, the matter should not be set-aside to the file of the

AO to give one more opportunity to the assessee.

7.3 We have heard both the parties, and considered the arguments of

the Counsel for the assessee and counter arguments of the Ld.Sr.AR.

There is no dispute with regard to the fact that belated payment of

employees’ contribution towards PF & ESI can’t be allowed as deduction u/s.36(1)(va) r.w.s.2(24)(x) of the Act and this legal position has been

upheld by the Hon’ble Supreme Court in the case of Checkmate Services

Pvt. Ltd., (supra). Therefore, to this extent, we are in fully agreement

with the reasons given by the AO and sustained by the Ld.CIT(A) to make

additions towards disallowance of belated payment of employees’

contribution towards PF & ESI. However, the arguments of the Counsel

for the assessee is that the delay is due to lockdown imposed on account

of outbreak of Covid-19, because of this reason, there is a delay in

remittances of PF & ESI to the respective departments and this fact may

be verified by the AO in light of payment challans furnished by the

assessee and in case, delay is on account of Covid lockdown then the

same can’t be considered as delay for the purpose of Sec.36(1)(va) of the

Act.

7.4 We find that, the ITAT Mumbai Bench in the case of Diamour Jewels

(P) Ltd., has considered an identical issue of belated payment of PF & ESI

and reasons for such delay on account of lockdown imposed by the

Government for curtailing Covid outbreak and after considering relevant

facts held as under:

The undisputed fact is that the delay in deposit of PF and ESI pertains only to the two months of April, 2020 and May, 2020 which were the peak period of pandemic of COVID-19 when lockdown was imposed by the government. It is also a fact that when there was relaxation in the lockdown, assessee vigilantly deposited employees' contribution for these two months without waiting for any further delay on this account. It is also undisputed that for all other months, assessee had deposited the employees' contribution of PF and ESI within the due dates prescribed under the relevant Acts irrespective of extended period of COVID-19 pandemic. [Para 7]

Before delving into the issue raised, in the aforesaid factual matrix, it is worth taking note of the certain key data points relating to pandemic of COVID-19 and lockdown imposed thereby. It is noted that to control the spread of the coronavirus COVID-19 pandemic, the Government of India imposed various phases of lockdown starting from the third week of March 2020. The World Health Organization (WHO) declared COVID-19 a pandemic on 11-3-2020. In India, a complete nationwide lockdown was implemented for a total of 68 days through four phases, from 25-3-2020 to 31-5-2020 plus a pre-lockdown phase. The overall period was divided into five phases, starting from Phase 0 (pre-lockdown), followed by Phases 1-4, as per the lockdown phases implemented by the Government of India. [Para 7.1]

The circular issued by EPF Organisation according to which delay in deposit of contributions during the lockdown period is without mens rea of the employer and such delay cannot be attributed to any culpable state of mind of the employer and therefore does not attract penal provisions of section 14B. It is stated in this circular that for any delay in payment of any contributions or administrative charges due for any period during the lockdown, no proceeding would be initiated for levy of penal damages in such cases. [Para 7.2]

In the given peculiar set of facts and circumstances of this present case, the moot point to be considered in respect of the aforesaid delay in depositing employees' contribution to PF and ESI is the effect of circular issued by EPF Organisation whereby levy of penal damages on account of delay under the relevant Act for deposit of contributions during the period of lockdown has been waived off vis-a-vis the decision of Supreme Court in the case of Checkmate Services (P.) Ltd.(supra) wherein the sole focus of the Court while deciding the instant issue was in the context of due dates prescribed under the relevant Act for claiming deduction under section 36(1)(va). [Para 7.3]

The contention raised is that since the penal damages have been waived off by the EPF Organisation itself for the delay in deposit of contributions during the period of lockdown, there cannot be any adverse effect of not depositing the employees' contribution of EPF and ESI within the meaning of section 36(1)(va). [Para 7.4]

In the instant case, in the given peculiar fact pattern and circumstance, when the EPF Organisation itself has waived off the levy of penal damages for delayed payment during the period of lockdown by issuing the aforesaid circular, there is no question of treating the delay which occurred during the period of lockdown detrimental to the assessee under the Act, more specifically under the Explanation to section 36(1)(va). The delay in deposit of PF and ESI of the employees' share is for the month of April 2020 and May 2020. These months fell in the period of lockdown when pandemic of COVID-19 was at its peak. Due dates to deposit for these two months were 15-5-2020 and 15-6- 2020 as per the relevant enactments. Assessee deposited the delayed amount in the month of June 2020 when there was relaxation in the lockdown and banking was permitted. There is no mischief on the part of the assessee in holding the employees' contribution for long periods as contemplated in the memorandum explaining the provisions introduced in the Finance Bill, 1987 and CBDT circular and dealt by the Supreme Court in Checkmate Services (P.) Ltd. (supra). In fact, assessee demonstrated its vigilance in depositing the impugned amounts at the first opportunity it got when the relaxation was given in the lockdown. Also, for all the subsequent months, the deposits have been on or before the prescribed due dates under the relevant enactments. Thus, in the instant case under its peculiar set of facts, there cannot be any adverse effect on the assessee of not depositing the employees' contribution of EPF and ESI within the meaning of section 36(1)(va) when the relevant enactment itself had given a waiver from levy of penal damages for the delay in deposit during the lockdown period. The addition so made is deleted. [Para 8.4]

:: 10 :: 7.5 In the present case, the assessee has furnished month-wise details

of contribution to PF & ESI along with challan and claimed that the delay

is mainly on account of lockdown imposed by the Government. If the

claim of the assessee is correct that the delay in remittances of PF & ESI

is mainly on account of lockdown imposed by the Government, then the

said delay in remittance of PF & ESI should not be considered for the

purpose of Sec.36(1)(va) of the Act. Therefore, we set-aside the issue to

the file of the AO and direct the AO to consider the claim of the assessee

in light of evidences that may be filed by the assessee to justify its case.

The AO is directed to reconsider the issue and decide the same in

accordance with our findings given hereinabove.

Nos.6 & 7 of the assessee’s appeal is addition of Rs.31,21,770/- towards

interest on late payment of TDS.

8.1 The Ld. Counsel for the assessee submitted that interest paid on

TDS is compensatory in nature but not penal in nature and therefore, the

same should be allowed as deduction u/s.37(1) of the Act. In this regard,

he relied upon the decision of ITAT, Mumbai Bench in the case of Resolve

Salvage & Fire India (P) Ltd. v. DCIT reported in [2022] 195 ITD 266

(Mumbai-Trib.) and also relied upon the following decisions of the ITAT,

Hyderabad Bench:

:: 11 :: • Mercury Projects Pvt. Ltd. v. DCIT in ITA No.440/Hyd/2018 order dated 30.01.2019. • Trinity Infraventures Ltd. v. ACIT in ITA No.403/Hyd/2021 order dated 25.08.2022. • Taksheel Solutions Ltd. v. ACIT in ITA No.1768/Hyd/2012 order dated 17.06.2016. 8.2 The Ld.Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that interest paid on TDS is in the

nature of tax and the same can’t be allowed as deduction u/s.37(1) of the

Act. Further, interest payment on TDS is not compensatory in nature as

claimed by the Ld. Counsel for the assessee, but it is penal in nature

because liability towards TDS is dues to the Government and any delay in

remittances of such dues and consequent interest payments partakes the

nature of penal interest and same can’t be allowed as deduction. In this

regard, he relied upon the decision the Hon’ble Madras High Court in the

case of Chennai Properties & Investment Ltd., reported in [1999] 239 ITR

435 (Mad).

8.3 We have heard both the parties, perused the materials available on

record and had gone through orders of the authorities below. There is no

dispute with regard to the fact that the assessee has claimed deduction

towards interest paid on late payment of TDS amounting to

Rs.31,21,770/-. Interest paid on TDS is nothing but a payment of tax

duty cess, etc., because TDS is a mechanism for collection of tax, on

behalf of Government. The assessee acts as trustee in respect of TDS

deducted and is under statutory obligation to remit the same within the

prescribed time. In case, delay in remittance of TDS to the Government :: 12 :: account interest is chargeable, and it partakes penal in the nature for

delay in remittance of Government funds and therefore, the same can’t

be considered as compensatory charges for business operations. This

legal principle is supported by the decision of the Hon’ble Madras High

Court in the case of Chennai Properties & Investment Ltd., where it has

been clearly held that interest paid u/s.201(1A) of the Act partakes the

colour of tax and being in the nature of Income Tax, it can’t be allowed as

deduction. In so far as various case laws relied upon the by the Ld.

Counsel for the assessee including the decision of ITAT, Mumbai Bench in

the case of Resolve Salvage & Fire India (P) Ltd., (supra), in our

considered view, the above case laws are contrary to the ratio laid down

by the Hon’ble Madras High Court in the case of Chennai Properties &

Investment Ltd., (supra) and therefore, considered to be not applicable to

the fact of the present case and thus, rejected.

8.4 In this view of the matter and considering the facts and

circumstances of the case, we are of the considered view that there is no

error in the reasons given by the Ld.CIT(A) to sustain the addition made

towards disallowance of interest payment on TDS and thus, we are

inclined to uphold the findings of the Ld.CIT(A) and reject the ground

taken by the assessee.

:: 13 :: 9. The next issue that came up for our consideration from Ground

Nos.8 & 9 of the assessee’s appeal is addition of Rs.2,64,040/- u/s.37 of

the Act towards unproved purchases.

9.1 The AO made addition on the ground that on verification,

information available with the department, it was noticed that the

assessee has made substantial purchases from various parties and further

when notices were issued u/s.133(6) of the Act to those parties, few

parties not responded to the notices by filing relevant details. Therefore,

the AO observed that in respect of six parties referred to in Page No.7 of

the assessement order and aggregate amount of purchases from them to

the tune of Rs.2,64,040/- treated as unproved purchases and disallowed

u/s.37 of the Act.

9.2 The Ld. Counsel for the assessee, submitted that the Ld.CIT(A)

erred in sustaining the additions made by the AO towards unproved

purchases only on the basis of non-response from the parties, even

though, the assessee has filed various evidences including purchase bills

from the parties and consequent payment made against the purchases.

Therefore, he submitted that the additions made by the AO should be

deleted.

9.3 The Ld.Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that the parties never responded to

notices issued u/s.133(6) of the Act. The assessee has not furnished :: 14 :: evidences except filing invoice copies. Since the assessee has not proved

purchases with relevant details, the AO has rightly disallowed purchases

from six parties to the tune of Rs.2,64,040/- u/s.37 of the Act.

Therefore, he submitted that the additions made by the AO and sustained

by the Ld.CIT(A) should be upheld.

9.4 We have heard both the parties, perused the materials available on

record and had gone through orders of the authorities below. The AO

made addition of Rs.2,64,040/- towards unproved purchases from six

parties only on the ground that the above six parties have not responded

to the notices issued u/s.133(6) of the Act during the course of

assessement proceedings. Except this, the AO has not pointed out any

discrepancies or incorrectness in purchases claimed by the assessee. In

fact, the assessee has furnished relevant invoices for purchases from the

above parties and also filed payment against purchases. Since the

purchases from the above parties is supported by necessary evidences, in

our considered view, merely for the reason of not responding to notices

u/s.133(6) of the Act, the purchases from the parties can’t be considered

as non-genuineness and for this purpose, disallowance can’t be made

u/s.37 of the Act. The Ld.CIT(A) without appreciating the fact, simply

sustained the additions made by the AO. Thus, we set-aside the order of

the Ld.CIT(A) on this issue and direct the AO to delete the additions of

Rs.2,64,040/- made u/s.37 of the Act.

:: 15 :: 10. The next issue that came up for our consideration from Ground

Nos.10 & 11 of the assessee’s appeal is disallowance of Rs.1,14,15,885/-

towards loss on fixed assets due to flash flood in Uttarakhand.

10.1 The Ld. Counsel for the assessee submitted that the Ld.CIT(A) erred

in sustaining the additions made by the AO without appreciating the fact

that the assessee has claimed loss on fixed assets not on account of sale

or reversal but due to damage of assets on account of flash flood in

Uttarakhand where the construction equipment, plant & machinery, stores

and spares were washed away and the entire block of assets in the books

of accounts has been treated as loss due to flood. Since the loss on fixed

assets is on account of natural calamity and also pertains to the business,

the same should be allowed as business loss. Therefore, he submitted

that the additions made by the AO should be deleted.

10.2 The Ld.Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that loss on fixed assets is capital in

nature, and any capital expenditure or capital loss can’t be allowed as

deduction u/s.37 of the Act. If at all, the assessee has lost or damaged

certain plant & machinery or other fixed assets, the value of such assets

can be reduced from Written Down Value (WDV) for the purpose of

claiming depreciation. Since loss incurred by the assessee is capital in

nature and governed by Section 50 of the Act, the AO has rightly

disallowed loss on fixed assets. The Ld.CIT(A) after considering relevant :: 16 :: facts has rightly sustained the additions made by the AO. Therefore, he

submitted that the order of the Ld.CIT(A) should be deleted.

10.3 We have heard both the parties, perused the materials available on

record and had gone through orders of the authorities below. There is no

dispute with regard to the fact that several items of construction

equipment and plant & machinery in operation at the site were washed

away during flash flood in Uttarakhand which includes stores & spares and

inventories. The assessee has quantified the loss towards damages, plant

& machinery, stores & spares and the same has been considered as

operational loss to the company in the ordinary course of business. No

doubt, in the ordinary course, profit or loss arising on sale or transfer of

any depreciable asset, should be dealt with under the provisions of Sec.50

of the Act and any gain or loss should be treated as capital gains or

capital loss. If the loss arises on account of natural calamity like floods,

then the entire block of assets including stores & spares should be taken

out from the books of accounts and once the block of assets ceased to

exist from the books of accounts, then the resultant loss if any should be

treated as operational loss arising in the course of business operations of

the assessee. Since the loss incurred by the assessee is on account of

floods but not on account of sale or transfer of any depreciable asset, in

our considered view, loss incurred by the assessee can’t be considered as

capital loss. The AO and the Ld.CIT(A) without appreciating the relevant

facts simply disallowed the loss on assets as capital in nature. Thus, we :: 17 :: set-aside the order of the Ld.CIT(A) and direct the AO to delete the

addition made towards loss on fixed assets of Rs.1,14,15,885/-.

Nos.12 to 14 of the assessee’s appeal is denial of credit on TDS of

Rs.24,20,916/-.

11.1 The AO denied credit for TDS on mobilization advance on the

ground that the assessee has not offered resultant income embedded in

advance for the year under consideration and in view of provisions of

Sec.199 r.w.r.37BA of the Income Tax Rules, 1962, credit for TDS should

be allowed in the year in which income relatable to said TDS is offered to

tax.

11.2 The Ld. Counsel for the assessee submitted that the assessee has

claimed credit for TDS deducted on mobilization advance and the

mobilization advance received from principal has been adjusted against

running bills for the year under consideration and in the subsequent

Financial Years. Further, it is practically impossible to keep track on the

apportionment of mobilization advance for each assessement year going

by the nature of business of the assessee and therefore, when the income

offered by the assessee for the year under consideration is in excess of

mobilization advance, then the AO ought to have allowed credit for TDS

as claimed by the assessee. In this regard, he relied upon the decision of :: 18 :: ITAT, Hyderabad Bench in the case of Zelan Projects Pvt. Ltd., in ITA

No.1361/Hyd/2013 order dated 12.01.2015

11.3 The Ld.Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that as per provisions of Sec.199(3)

r.w.r.37BA of IT Rules, 1962 credit for TDS can be allowed only in the

year in which income relatable to such TDS was offered to tax. Since the

assessee has failed to prove income offered for the year under

consideration, the AO has rightly disallowed credit for TDS deducted on

mobilization advance. The Ld.CIT(A) after considering the relevant facts

has rightly sustained the additions made by the AO and therefore, he

submitted that the order of the Ld.CIT(A) should be upheld.

11.4 We have heard both the parties, perused the materials available on

record and had gone through orders of the authorities below. There is no

dispute with regard to the legal position as per Section 199(3) of the Act

r.w.r.37BA of the IT Rules, because as per Sec.199(3) of the Act, credit

for TDS can be allowed in the year in which income relatable to said TDS

has been offered to tax. But, fact remains that whether income relatable

to said TDS has been offered to tax or not is a matter of fact which can be

verified through records maintained by the assessee for his business in

the previous year. In the present case, the assessee claimed that

mobilization advance received from the principal has been adjusted

against running bills issued by the assessee on periodical basis and the :: 19 :: entire mobilization advance received from the principal has been either

adjusted in the same Financial Year or in the subsequent Financial Year,

since income offered by the assessee was in excess of mobilization

advance received by the assessee. The AO ought not to have denied

credit for TDS deducted and mobilization advance. We find that the

assessee is into the business of execution of civil contracts has received

mobilization advance from the principal. Further mobilization advance

received from the principal has been adjusted against running bills

submitted by the assessee on periodical basis either in the same Financial

Year or in the subsequent Financial Year. The assessee claims that the

entire mobilization advance received for the year under consideration has

been fully adjusted against the bills submitted by the assessee which is

evident from relevant financial details where the assessee has received

advance of Rs.8.43 Crs. as material advance, against which, the assessee

has offered an amount of Rs.8.41 Crs. as Revenue from operations. Since

the entire mobilization advance has been adjusted against running bills

and further, it is difficult to keep track on apportionment of mobilization

advance for each previous year, in our considered view, the AO ought not

to have denied credit for TDS deducted on mobilization advance. The

Ld.CIT(A) without appreciating relevant facts simply sustained the

additions made by the AO. Thus, we set-aside the order of the Ld.CIT(A)

and direct the AO to allow credit for TDS of Rs.24,20,916/- deducted from

mobilization advance as claimed by the assessee.

:: 20 :: 12. In the result, appeal filed by the assessee is partly allowed for

statistical purposes.

Order pronounced on the 15th day of July, 2026, in Hyderabad.

Sd/- Sd/- (िवजय पाल राव) (मंजूनाथा. जी) (VIJAY PAL RAO) (MANJUNATHA.G) उपा�� /VICE-PRESIDENT लेखा सद�/ACCOUNTANT MEMBER

Hyderabad, dated 15.07.2026. TLN

आदेशकी �ितिलिप अ�ेिषत/ Copy of the order forwarded to:

िनधा�रती/The 1 : M/s. Rithwik Projects Pvt. Ltd., C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Assessee Somajiguda, Hyderabad-500 082. राज�/ The Revenue 2 : The ACIT, Central Circle-2(2), Hyderabad.

3 The Principal Commissioner of Income Tax, Hyderabad. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT Hyderabad. 4 गाड�फ़ाईल / Guard file 5

आदेशानुसार / BY ORDER TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.07.15 15:41:49 +05'30'

Sr. Private Secretary ITAT, Hyderabad